REFILE-UPDATE 1-Husqvarna cautiously upbeat as Q1 earnings beat forecast

Thu Apr 24, 2014 3:31am EDT

(Clarifies that CEO referring to Europe in paragraph 8)

* Q1 adj op profit 903 mln SEK, vs 858 mln in Reuters poll

* Posts stronger profitability

* Demand up with early spring in Europe, stocking in America

STOCKHOLM, April 24 (Reuters) - Outdoor equipment maker Husqvarna reported bigger-than-expected first-quarter earnings and higher operating margins, showing that a long-awaited turnaround is finally taking hold.

Its shares were up 9 percent at 708 GMT.

The world's largest producer of outdoor power products such as lawn mowers and garden tractors said on Thursday that an early spring in Europe, its most important market, and an inventory build-up in North America, despite chilly temperatures, had led to growth in demand.

Husqvarna, which competes with the likes of Stanley Black & Decker, Deere and Toro, also shed around 4 percent of its workforce last year in an bid to bring down costs.

Adjusted operating profit rose to 903 million Swedish crowns ($137 million) in the quarter, beating the 858 million seen in a Reuters poll and a profit of 688 million in the same quarter of 2013.

The group, which is aiming for an operating margin of 10 percent in 2016, had a margin of 9.3 percent, up from 7.6 percent in the same period a year ago.

First-quarter results benefited from lower direct material costs as well as "good market demand", it said.

In Europe, "we have a better start of the second quarter this year. On the other hand, we had a strong ending to Q2 last year. But we are cautiously optimistic," Chief Executive Kai Warn said.

Net sales rose 7 percent to 9.7 billion crowns in the first quarter from a year ago.

"Going forward, we will continue the execution of the Accelerated Improvement Program. In addition, we are cautiously optimistic about the underlying demand," Warn, who took the helm last year, said in a statement.

Husqvarna's North American business has long been a problem for the firm, first due to a botched move of its production from one factory to another and more recently to spiralling costs in its deliveries to retailers.

Proving it has a better grip on the region, Husqvarna reported a 4.8 percent operating margin for the Americas in the first quarter. It had a 0.2 percent margin for the region in 2013.

($1 = 6.5704 Swedish Crowns) (Reporting by Helena Soderpalm and Mia Shanley; editing by Niklas Pollard and Jane Baird)